Warrior Trading Blog

Lunch Money! | Mike’s Trade Recap

Hey, what’s up guys? It’s Monday and the lack of momentum continues. I am ending the day relatively flat, up just $22 on two trades. We ended up stopping out of both of them when there was no follow through and the breakdowns didn’t actually happen. So playing a lot of defense right now.

It’s really important to stay on top of that because if you don’t, you’re going to get chopped out. And these are the times in the markets if you try to reach for something that isn’t there, you’re going to really hurt yourself trying to do so. So it’s important to definitely play on defense, a risk adverse, and just wait until that action returns and that’s when we can become aggressive again.

So let’s take a few minutes and breakdown today’s trade in today’s recap.

All right. Good afternoon, guys. I want to do a quick recap here of this morning’s action. Again, just a slow day. The action is still very slow. We haven’t seen much momentum return really at all, at least in the large cap stocks. And we gave it a shot today. Two different trades actually, which is kind of rare for me to take more than one in a day. But we’re trying to spread it out a little bit to see if we can pick up some profit from trying to get two names going. But we had to stop on both of them. Thankfully, we were able to get out just before they turned around. But playing a lot of defense. That’s just really what it’s been about here in the last two weeks. And we’ll continue to do so until that action returns, until we can see that the momentum has returned, and then we’ll become aggressive again.

So as you can see, guys, stopped out of Roku real quick when I saw some action I didn’t like, which I’ll talk about here shortly. Basically flat. And again GE got short, and I just instead of break even stop on that to see if it was going to drift. Ended up stopping out of that pretty early, and we’ll talk about that one as well.

So overall, basically flat day. Not too much to really talk about there. But what I do want to talk about is how the trades actually played out themselves so you can get an idea of the type of action we were dealing with and why I actually stopped out of these names.

So let’s take a look at Roku. So what did we like on Roku? Well, we had a couple different things going on here, and what we had was a pivot in through 60. And then we had a pivot, a long return pivot coming in through this 58.80’s. So we had a pivot there. Then a 50-day moving average. So what I wanted to see was basically clear 59 to get down through that to look for a short into this pocket. Into this pocket, we had some short term ascending support as well as this pivot in through roughly 55, a nice zone of support right here. You look on the five minute, you’ll see that those levels correlated with each other, and would’ve made for a really nice target to use for a point in the action to get out of the trade, recover, or even turn around the trade for a long or a backs.

So what I was looking for was it to clear down through these, hold the low, and rollover into this pocket. Now Roku did. It only had a downgrade on it from Citi Group. It was a downgrade to a sell, which is it can be significant news depending on the type of stock we’re trading. Since Roku was a former momentum name, it has made some big moves on these analysts comments before. We wanted to watch it, and being that there wasn’t really much else to look at, we put it on the watch list below 59 to see if we could get this thing to really start to rollover and start to move through this pocket and try to get down to the support.

So what happened on this? Well, the market opened, it looked pretty good, right? We had a first five minutes, pretty heavy sell down here on really good volume, well over 1.4 million shares. Traded, which is great, pretty of volume for this stock, and we closed below the level. Now a little bit of extension here. Definitely don’t want to short on an extension into a support level. So what did I do? I wanted to wait to see if we got a retest and fail. Now I use the fast timeframe to enter, which can be the 15 second, 30 second, or even the 24 second depending on the stock that I’m trading. But if you look at the action here, I’ll show you what I saw, where I got short, and why I stopped out.

So this is the first move down to the support, and I wanted to see how it would react to that support. It was a big pivot level. It was a big support level. So I wanted to see that we would actually fail it and get back below. So this is where we tested it. We came back up. Started to look like a false break, then we kind of consolidated around it for a bit. Tested the VWAP, and then we started to pull off of that. And I use very short-term speed lines to kind of determine where that point and time will be where I might’ve initiated trade or get out of the trade. So as we started to fail VWAP, we started to come back down through the support, I got short. Through here, I started anticipating the breakdown, and we rolled. We rolled right to the low, looked really good, but then all of a sudden something happened here that I noticed right away. And I immediately closed out the trade.

What happened was as we failed through the support and we failed through the low, we rejected it. Popped right back up. Since we were below such a major pivot point and we were taking out the low, the stock was weak, this stock should have flushed hard through that into this big window. When that didn’t happen, I immediately got out of the trade and closed it out because it essentially double bottomed and it wasn’t breaking down on momentum, which there would be no reason it should have broken down into this pocket because we had a big open window, the stock was weak, had a downgrade, we were failing major support. Everything pointed towards a major breakdown here, and it didn’t happen. Being the way the market has been for the past several weeks, I played a lot of defense, and I got out immediately. And I’m glad I did obviously because that’s where it turned around and went back to high.

So that’s what I saw on the action. I saw a couple factors again going on there was that you were on the low a day and you were below the major support and you rejected VWAP. There really should’ve been no reason this shouldn’t have flushed hard, at least a point or more on that breakdown, and it didn’t happen. Didn’t like what I saw, so I got out and closed that trade.

And this didn’t really do much the rest of the day. Kind of just moved around. It was kind of messy. Not really much to speak of there. So I ended up not touching that again. You can see it react to that support again here in the afternoon. But no trades on this after that. I didn’t really want to get involved because that was the level that it should’ve broken down, especially the volume it had, and it didn’t want to do it. And that was the plan, got to follow the plan, and the plan didn’t want to play out, so we called it a day on that stock.

Now just before I took this trade, I was watching GE, and GE kind of a gap down here this morning, below all the major moving averages. Basically had room to fade back towards $9. If you look at the daily, we had a little bit of ascending support that we had taken out, right? We were breaking down through this, breaking down through the moving averages. Had a nice potential move down towards $9, and on a $9 stock, 50 cent move is a decent one. It’s 4-5%, and that’s something that I want to definitely pay attention to, especially on a stock like GE because this is a lot of volume. You can take a massive position in this, and it’s very, very manageable.

So what did I do on GE? Well, I wanted to see the pre-market low pretty much be taken out, which was right here at 9.37. And then we had a pocket from there basically down to $9. So I was okay with trying to trade that range to see if we would actually kind of take that out and get a nice easy, manageable trade in through that zone. So market opened, we faded hard. I wanted to see a pivot put in just like always. So let’s go to the fast timeframe. Take a look at what happened there.

And what happened here was opened up, got below VWAP, pivoted lower. Again we test, fail. Here’s where we started to test the pre-market low. Kind of consolidated in through here. As we started to breakdown, I anticipated that we were actually going to continue breaking down. I got short at 9.38, and we rolled. First target was at 9.20. Next target was down here around $9. So I basically sat here with this trade, and I said, “All right. Well, I’m going to set my stop to break even, and I’m going to set my bracket out. Basically I’m going to set some targets at 9.20 and 9.05, and my stops going to be break even for the full position.”

So we started to look good. We broke down, went to lows, came back up, retested the pre-market lows from the underside and failed. Rolled to lows again, looked really good, and then we kind of popped back up. Same thing happened on Roku, right? We didn’t breakdown and flush to the lows. We popped back up, and then my break even was hit at 9.38. And I got out. And that put me flat on that trade. So no continuation there initially, but you can see GE did end up making a decent move here into the afternoon once it retested that level. Again, you can see it, it held below that pre-market level, and then faded nicely down to 9.15. So one of my targets would have been hit today, the other one not so much. So I would’ve got half the position off if I did stick with this.

Again, probably not really worth the opportunity cost in a sense because you had to sit here for a very long time to get a relatively small profit. I’m okay with stopping out break even. The momentum just wasn’t there early. So we decided to call it a day, and that’s how Monday went.

Unfortunately, the action just slow. We tried to very probable setups. They just didn’t end up playing out, but it’s important right now, guys, to really play a lot of defense, be really risk averse. It either goes or it doesn’t right now, and if it doesn’t, you need to get out of the way quick because these are stocks … These WIP sales in the market, lack of volatility is going to make it really tough to trade. So unless you have something very significant, just stay away. Wait for the home run setup to present itself, and then become involved, which is what we’re doing. Just not getting the follow through, but it will come back. Just have to be patient and wait for that time to come.

So that’ll be the recap for today, guys. We’ll see everyone back here first thing tomorrow.

Hey, everyone. Thanks for watching the videos. I’ll continue to make sure that all of the watch list, as well as the recaps, are available to all of you. Make sure you subscribe to keep up to date on what’s hot and what’s not in the market.